US consumer confidence hits seven year high

US consumers are at their most confident since January 2007, according to a survey from the University of Michigan.

The University of Michigan’s index of US consumer confidence rose to 93.8 in December, up from 88.8 in November and a head of the consensus rise to 89.5.

Senior US economist at Capital Economics Paul Dales says this rise suggests the recent strong performance of retail sales will continue in December.

“Confidence is clearly being boosted by record high equity prices, the breakneck pace of job growth and the plunge in gasoline prices,” Dales says.

With the University of Michigan study not being seasonally adjusted, Dales notes that three points of the five point rise were owing to December’s normal season effects. However, he adds that Capital Economics’ seasonally adjusted index rose by two points, also hitting a seven-year high.

Dales says: “At face value, this survey is consistent with annualised real consumption growth accelerating from 2.2 per cent in the third quarter to around 5.0 per cent in the fourth. We currently think that 3.0 per cent is more plausible, but it clear in which direction the risks lie.”